(12) Income Taxes

The components of income before the provision for income taxes are as follows:

	2012		2011		2010
Domestic operations	$	16,418	$	7,039	$	3,581
Foreign operations		8,322		9,923		6,622
	$	24,740	$	16,962	$	10,203

The components of the provision for income taxes are as follows:

	2012			2011			2010
Federal:
Current	$	6,533		$	5,342		$	2,101
Deferred		(1,476	)		(561	)		(763	)
State and local:
Current		716			634			314
Deferred		(277	)		(162	)		(62	)
Foreign:
Current		2,287			2,693			2,003
Deferred		(24	)		48			29
	$	7,759		$	7,994		$	3,622

Income taxes payable, which is included in accrued expenses, was $800 and $1,240 at June 30, 2012 and 2011, respectively.

The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at June 30, 2012 and 2011 are presented below:

	2012			2011
Deferred tax assets:
Accrued environmental remediation liabilities not currently deductible	$	302		$	370
Accrued deferred compensation		2,429			2,001
Accrual for acquisition costs not currently deductible		337			350
Accrual for sales deductions not currently deductible		1,528			1,174
Additional inventoried costs for tax purposes		255			176
Allowance for doubtful accounts receivable		134			81
Depreciation and amortization		1,438			549
Accrual for payments to former senior management and other personnel related costs		159			194
Contingent consideration		489			-
Domestic net operating loss carryforwards		200			220
Foreign net operating loss carryforwards		965			1,283
Total gross deferred tax assets		8,236			6,398
Valuation allowances		(946	)		(1,019	)
		7,290			5,379

Deferred tax liabilities:
Foreign deferred tax liabilities		(8	)		(357	)
Unrealized gain on investments		-			(178	)
Goodwill		(1,457	)		(622	)
Installment gain on sale of assets		-			(136	)
Other		(166	)		(219	)
Total gross deferred tax liabilities		(1,631	)		(1,512	)

Net deferred tax assets	$	5,659		$	3,867

The following table shows the current and non current deferred tax assets (liabilities) at June 30, 2012 and 2011:

	2012			2011
Current deferred tax assets, net	$	948		$	747
Non-current deferred tax assets, net		4,719			3,477
Current deferred tax liabilities		-			(306	)
Non current deferred tax liabilities		( 8	)		(51	)
Net deferred tax assets	$	5,659		$	3,867

The net change in the total valuation allowance for the year ended June 30, 2012 was a decrease of $73. The net change in the total valuation allowance for the year ended June 30, 2011 was an increase of $65. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company has established valuation allowances primarily for net operating loss carryforwards in certain foreign countries. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets are not expected to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating loss carryforwards are utilizable and temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the net deferred tax assets recognized at June 30, 2012, the Company will need to generate future taxable income of approximately $14,900.

Based upon the level of historical taxable income and projections for taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. There can be no assurance, however, that the Company will generate any earnings or any specific level of continuing earnings in the future. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Deferred taxes have not been provided for undistributed earnings of foreign subsidiaries amounting to approximately $81,400 at June 30, 2012 since substantially all of these earnings are expected to be permanently reinvested in foreign operations. A deferred tax liability will be recognized when the Company expects that it will recover these undistributed earnings in a taxable manner, such as through the receipt of dividends or sale of the investments. In connection with the Rising acquisition, the Company repatriated approximately $15,000 of cash from certain foreign subsidiaries, resulting in a tax charge of approximately $2,600 recorded during the year ended June 30, 2011. The Company intends to permanently reinvest these undistributed earnings and has no plan for further repatriation. Determination of the amount of unrecognized deferred U.S. income tax liabilities is not practical to calculate because of the complexity of this hypothetical calculation. In addition, unrecognized foreign tax credit carryforwards would be available to reduce a portion of such U.S. tax liability.

We operate in various tax jurisdictions, and although we believe that we have provided for income and other taxes in accordance with the relevant regulations, if the applicable regulations were ultimately interpreted differently by a taxing authority, we may be exposed to additional tax liabilities.

A reconciliation of the statutory federal income tax rate and the effective tax rate for continuing operations for the fiscal years ended June 30, 2012, 2011 and 2010 follows:

	2012			2011			2010
Federal statutory tax rate		35.0	%		35.0	%		34.0	%
State and local taxes, net of federal income tax benefit		3.0			2.4			2.1
Decrease (increase) in valuation allowance		0.2			(0.4	)		0.5
Foreign tax rate differential		(3.0	)		(4.4	)		(3.1	)
Impact of repatriation of non-US earnings		(2.1	)		15.3			-
Other		(1.7	)		(0.8	)		2.0
Effective tax rate		31.4	%		47.1	%		35.5	%

At June 30, 2012, the Company had utilizable foreign net operating loss carryforwards of approximately $600 which are available to offset future foreign taxable income and which have no expiration date.

There are no material unrecognized tax benefits included in the consolidated balance sheet that would, if recognized, have a material effect on the Company’s effective tax rate. The Company is continuing its practice of recognizing interest and penalties related to income tax matters in income tax expense. The total accrual for interest and penalties related to uncertain tax positions was $0 June 30, 2012 and June 30, 2011. The Company did not recognize interest and penalties during the years ended June 30, 2012 and June 30, 2011. The Company recognized interest and penalties of $5 related to income taxes during the year ended June 30, 2010. The Company files U.S. federal, U.S. state, and foreign tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2009 (in the case of certain foreign tax returns, fiscal year 2006).